Overview of Our Business

Future FinTech is a holding company based in Florida that historically made fruit juices in China. Due to increased costs and environmental regulations in China, the company has shifted its focus to financial technology services. The company now operates in supply chain financing and trading in China, asset management and brokerage services in Hong Kong, and money transfer services in the UK.

The company faces risks from its China operations due to recent regulatory crackdowns by the Chinese government on companies listed overseas. These regulations have not yet impacted Future FinTech’s operations, except for some new filing requirements that the company has not completed yet.

Future FinTech currently owns 9 direct subsidiaries that support its various financial services businesses. A former subsidiary, Chain Cloud Mall, was dissolved in March 2024 due to minimal revenue since 2021.

Supply Chain Financing and Trading in China

Since 2021, Future FinTech has provided supply chain financing and trading services related to commodities like coal, aluminum, sand, and steel in China. The company serves large state-owned enterprises by providing working capital and accelerating payments.

Future FinTech signs purchase and sale agreements with suppliers and buyers of commodities. Revenue is generated from sales commissions and from some commodity sales where Future FinTech takes ownership of the goods. This business segment focuses on high-volume commodities to reduce risk.

Asset Management, Brokerage and Investment Banking Services in Hong Kong

Future FinTech subsidiary NT Asset Management (NTAM) provides asset management services to professional investors in Hong Kong. NTAM manages investment portfolios across equities, bonds, precious metals, currencies, and derivatives. As of March 2024, NTAM managed assets worth around $359 million.

In November 2023, Future FinTech acquired a Hong Kong firm with securities, futures, and consulting licenses. This new subsidiary provides brokerage and investment banking services.

Money Transfer Business

In the UK, Future FinTech subsidiary FTFT Finance offers international money transfer services online, on mobile, and through agents. This gives Future FinTech exposure to the large global remittance flows market.

Impact of COVID-19 on Our Business

The COVID-19 pandemic and China’s strict policies disrupted Future FinTech’s China operations in early 2020. New outbreaks in 2022 and relaxed policies in late 2022/early 2023 led to more disruption. The inability to hold marketing events for the Chain Cloud Mall e-commerce platform led Future FinTech to dissolve the subsidiary in March 2024.

While Future FinTech’s businesses have recovered, new COVID outbreaks present a risk. Any pandemic-related instability could also impact Future FinTech’s ability to raise capital if needed.

Results of Operations

First Quarter 2024 vs First Quarter 2023

Revenue

In Q1 2024, revenues increased 52% to $5.1 million, from $3.4 million in Q1 2023. Asset management revenue grew 38% due to more assets under management. Supply chain financing/trading revenue rose 299% due to higher commodity sales. Other revenue grew 240%, mainly from debt recovery consulting and bond services.

Gross Profit and Margin

Gross profit rose 63% to $2.0 million in Q1 2024 as revenues increased. Overall gross margin improved slightly to 38.1% from 35.7% in Q1 2023, as the asset management business saw higher margins.

Operating Expenses

Operating expenses rose 20% to $4.5 million in Q1 2024. General and administrative costs were flat at $3.4 million. Selling and bad debt provision expenses increased due to higher bonuses and a methodology change. R&D spending fell as salaries decreased.

Other Income/Expenses

Other expenses rose to $1.7 million in Q1 2024 from $0.04 million in Q1 2023, primarily reflecting legal costs related to an ongoing litigation.

Net Loss from Continuing Operations

The higher operating costs led the Q1 2024 net loss from continuing operations to widen by 86% to $4.0 million, from $2.1 million in Q1 2023.

Discontinued Operation

Future FinTech recorded a $0.65 million gain on the dissolution of the Chain Cloud Mall business in Q1 2024.

Loss Per Share

Basic and diluted loss per share from continuing operations was $0.20 in Q1 2024, compared to a loss of $0.14 in Q1 2023. Discontinued operations added $0.03 in earnings per share in Q1 2024.

Liquidity and Capital Resources

As of March 31, 2024, Future FinTech held cash and restricted cash of $14.9 million, down from $19 million on December 31, 2023. Working capital was $36.8 million, a slight decrease from December 31, 2023.

In Q1 2024, net cash used in operations fell to $8.2 million, from $10.3 million in Q1 2023, due to decreased other receivables.

Cash from financing activities increased to $2.6 million in Q1 2024, from cash used of $0.06 million in Q1 2023. This financing cash mainly came from a private placement stock issuance, net of costs.

Overall, Future FinTech maintains adequate liquidity and working capital to fund near-term operations. The company has historically relied on operating cash flows, customer advances, and bank loans to fuel working capital needs.

Outlook

Future FinTech operates in diverse financial services sectors across multiple countries and generates decent revenue growth. However, losses have persisted. Improving profitability, navigating China business risks, and maintaining adequate capital levels remain key challenges going forward. But the company is poised to ride some high-growth industries.